Multiple Choice Answers

Expenses that are incurred directly or entirely in connection with the sale of merchandise are classified as:
a. selling expenses
b. general expenses
c. other expense
d. administrative expense

The arrangements between buyer and seller as to when payments for merchandise are to be made are called:

a. credit terms
b. net cash
c. cash on demand
d. gross cash

A customer’s check received in settlement of an account receivable is considered cash.


XYZ Co. paid $1,000 in dividends to stockholders. How does this transaction affect the accounts of XYZ?

a. Cash will decrease by $1,000 and retained earnings will decrease by $1,000
b. Cash will decrease by $1,000 and revenues will increase $1,000
c. Cash will decrease by $1,000 and revenues will decrease $1,000
d. Net income will decrease by $1,000

A check drawn by a depositor for $195 in payment of a liability was recorded as $915. What adjustment is required in the depositor’s accounts?

a. decrease Accounts Payable; decrease Cash
b. increase Cash; decrease Accounts Receivable
c. increase Cash; increase Accounts Payable
d. increase Accounts Receivable; decrease Cash